You are viewing the printer-friendly version of Purchasing a Foreclosed HomePurchasing a Foreclosed HomeIf you're looking for foreclosed properties for a bargain you have to be willing to go through the effort. Foreclosures are about 30 to 40 percent below market, but most are about 5 percent below market. You may be able to get more of a savings if the property is purchased from the lender who holds the mortgage that is in default. They might be able to waive some of the closing costs and possibly offer a break on the interest rate or the down payment.The process for looking for foreclosures may be daunting, and if you're going to go this route you have to learn to navigate the foreclosure process. It requires research, preparation, patience and persistence. The process starts when the property owner falls behind on the mortgage payments. If the home owner has been in financial trouble before then perhaps the home has not been maintained. A home in poor condition could fetch bargain prices, but repairs can boost the cost again. When a lender decides to foreclose on a property, a notice of default is filed. This document is public record for buyers; it's the first step in locating property in foreclosure. A buyer can get magazines and newsletters that list properties in default. Once the home has been located, then search public records for liens. These can drive up the purchase price. Liens are usually for unpaid property taxes. For novice investors, buying from the lender is the safest way to buy. Most lenders hire a real estate agent to sell the homes, but sometimes buyers can succeed by pestering bank loan officers with low offers. Bank owned properties offer the safest deal for inexperienced foreclosure buyers. There is little to no risk. There are no taxes, no liens and no tenants to evict. A lender that's eager to sell might be willing to offer attractive terms. They may be willing to sell at below market rate or a lower than usual down payment. For more daring investors they can find home owners about to go into default. The home owner doesn't want to loose their equity so they may accept a portion of the difference between the equity and the homes market value. Pre-foreclosure buys offer bargains but demand persistence. That's because creditors are often hounding owners at this stage. It could be impossible to get a hold of the home owner. To purchase during an auction is high risk, but high reward. It's not for the first time foreclosure buyer. Most auctions take place at the county courthouse and the buyer may not be able to inspect the property. They also have to pay the entire purchase price the same day. aa |